Fiat Chrysler’s Marchionne Eyes Toward Merger with Hyundai
Jim Trainor, a Hyundai spokesman in the United States, said the company did
not comment on market rumors. HMG, the world’s fifth-largest automotive
manufacturer, owns the Hyundai and Kia automotive brands that operate US
manufacturing plants in Montgomery, Alabama (Hyundai Santa Fe, Sonata and
Elantra), and Kia (Santa Fe, Sorento) in West Point, Georgia.
One source said that Italian-Canadian Marchionne – who is as home in the
halls of the US Congress as in the European capitals of Rome, Paris and Berlin
– was fully aware that any merger between a Chinese automotive group and FCA
would be blocked by US President Donald Trump’s administration through the
Committee on Foreign Investment in the United States (CFIUS).
"The notion of a Chinese company taking over such an American icon as the
Jeep raises hackles not only of the Trump administration but of almost every
single member of the Michigan congressional delegation,” one Washington M&A
(mergers and acquisitions) regulatory lawyer said. "CFIUS is a very opaque
committee easily influenced by domestic political sentiments.”
However, the rumors of a
potential Chinese buyer served in part to soften White House and congressional
opposition of a merger between FCA and Korea’s Hyundai. Hyundai, unlike its
Japanese rival Toyota, is a relative latecomer to the US market and has the
most to benefit from taking over the Chrysler distribution network and iconic
Jeep brand.
Unlike with Volkswagen and
GM, Hyundai and FCA would face significantly fewer manufacturing-plant and
product overlaps both in the United States and Europe. The US-South Korean Free
Trade Agreement (KORUS FTA) – on top of closer political-military ties between
the United States and South Korea over North Korea’s nuclear proliferation –
would also make a Hyundai-FCA merger more palatable to the Trump
administration.
"I don’t want to sound
too cynical, but all Hyundai CEO Chung Mong-koo needs to do is announce several
billions of dollars in new automotive plants and thousands of new US jobs in
the states of West Virginia, Michigan, Ohio [and] so on and he [has] won over
Trump,” a Trump insider in Washington said.
While company insiders
say an FCA-VW merger would make the most sense, such a merger would face
impossible opposition in Germany and Italy because of automotive-plant
closures, notwithstanding VW’s willingness to consider such a merger after its
still internally traumatic diesel-engine scandals in the US and Europe.
Marchionne himself has
repeatedly warned his fellow auto bosses in the United States and Europe not to
underestimate the threat Korean manufacturers pose to legacy manufacturers.
Marchionne’s aggressive pursuit of a merger partner for FCA is due in part
to industry overcapacity and pressure on the part of Fiat controlling
shareholders the Elkanns and Agnellis. FCA chairman and family patriarch John
Elkann is much more interested in the news-media space than in automobiles. He
recently took over the controlling stake in The Economist Group from Pearson
PLC.
"In fact, John Elkann’s
office in London is inside the Economist building,” one source noted.
Source: Capitol Intelligence
